BMW 2007 Annual Report Download - page 64

62 Group Management Report
10 Group Management Report
10 A Review of the Financial Year
13 General Economic Environment
17 Review of Operations
41 BMW Stock and Bonds
44 Disclosures relating to Takeover
Regulations and Explanatory Report
47 Financial Analysis
47 – Internal Management System
49 – Earnings Performance
51 – Financial Position
52 – Net Assets Position
55 – Subsequent Events Report
55 – Value Added Statement
57 – Key Performance Figures
58 – Comments on BMW AG
62 Risk Management
68 Outlook
Risk management in the BMW Group
All entrepreneurial activities involve an element of
risk. Some of those risks can be quite substantial.
They may arise in conjunction with business opera-
tions or they may affect a company as a result of
external factors. Other risks arise as business be-
comes more international. As a globally operating
enterprise, the BMW Group is confronted with nu-
merous risks. Price fluctuations on the global cur-
rency, money, capital and commodity markets as
well as shorter innovation cycles result in an ever-
rising complexity which places great demands on
enterprises with international operations.
The BMW Group has long been founded on
the idea of consciously taking reasonable (measur-
able) risks and making full use of the opportunities
relating to those risks. As part of the risk reporting
system, the Board of Management and the Super-
visory Board are regularly informed about risks
which could have a significant impact on business
development.
The BMW Group has an integrated risk man-
agement system which provides it with the informa-
tion to be prepared for changes in market and other
conditions. The system also enables it to manage
the value-added process within the Group. Business
decisions are reached after consideration of in-depth
project analyses which present potential risks and
opportunities in detail. In addition, as part of the long-
term planning strategy and short-term forecasting
procedures, the risks and opportunities attached to
specific business activities are evaluated and used
as the basis for setting targets and implementing ap-
propriate risk-mitigation measures.
The risk management process ensures that
risks are identified at an early stage and that suitable
instruments are employed for both the manage-
ment
and monitoring of those risks. The risk manage-
ment
system comprises a wide range of organisa-
tional and methodological components that are all
finely tuned with each other. The system’s decen-
tralised structure also encourages a balanced ap-
proach to risks at all organisational levels.
The Group reporting system provides the deci-
sion makers with comprehensive, up-to-date in-
formation on performance against targets and on
new developments with regard to the market and
competitors. Critical success factors are monitored
continuously to ensure that unfavourable develop-
ments are identified at an early stage so that appro-
priate countermeasures can be implemented.
Overall risk management within the BMW Group
is managed centrally and is reviewed for its appro-
priateness and effectiveness by external auditors and
by the Group’s internal audit department. The find-
ings reached serve as the basis for further improve-
ments.
A network of risk managers is in place through-
out the Group, regularly carrying out risk reviews in
which significant risks are recorded, systematically
identified, measured and reported upon on a timely
basis. The reviews cover general economic, legal
and compliance risks as well as risks specific to the
automobile sector and to internal processes. Risk
managers are allocated to predefined areas to carry
out reviews for the risk network. The network can
draw on experts with specialist knowledge in specific
risk areas. Based on the BMW Group’s set of risk
principles, decisions are made as to whether risks
should be avoided, reduced, insured against or
entered into if there are potential business opportu-
nities.
For the basis for an organisation that is per-
manently learning, standardised rules are in place,
which are consistently applied throughout the
Group. Risk management is an ongoing task, since
changes in the legal, economic or regulatory envi-
ronment or changes within the Group itself could
lead to new risks or to known risks being assessed
differently. By regularly sharing experiences with
other companies, the BMW Group ensures that in-
novative ideas and approaches flow into the risk
management system and that risk management is
subjected to continual improvement. Regular train-
ing sessions, continued education measures and
information events are invaluable ways of preparing
people for new or additional requirements with
regard to the processes in which they are involved.
At present, no risks have been identified which
could threaten the existence of the BMW Group or
which could have a materially adverse impact on the
net assets, financial position or results of operations
of the Group. However, risks can never be entirely
ruled out.
In the course of its business activities, the BMW
Group is exposed to various types of risk which are
Risk Management